Email : jude@upperlinefinancial.comPhone: 504-610-5833

Blog

401(k) Fee Disclosure – Cutting Through the Jargon

After many years of waiting, the 401(k) Fee Disclosures are finally here.  If you haven’t received yours, you will likely be getting one in the mail in the coming month.  401(k) plans have a lot of expenses wrapped into the costs of the plan and it’s been hard to pinpoint exactly how much clients were being charged in the past.  The new forms aren’t perfect, but they certainly are a step in the right direction.

Your form should show what each investment option available inside of your 401(k) plan costs you per $1,000 invested.  It should also show on your quarterly statement how much is deducted from your account to cover plan-level fees, like the cost of administering the plan.  Many employers spread these costs out over the account balances of all employees, so as your account balance grows, you’re paying a greater percentage of the fees of the plan than new participants are.  Here are some of the other terms I’ve seen that clients often don’t fully understand.

  • Revenue Sharing Offset – Some 401(k) plan providers have received compensation from investment managers in exchange for offering their funds inside of a 401(k) plan platform.  This revenue sharing either was passed along to the plan sponsor (i.e. your employer) or the plan provider simply retained the additional income.  One way that plans did this was through 12b-1 fees
  • 12b-1 Fees – Mutual funds have an expense ratio that covers the expense of the fund’s operations, and some funds also have a separate 12b-1 fee.  This fee is for ‘marketing, distribution, and other services’.  Essentially, it’s money that pays for things like Revenue Sharing Offsets, or is paid as a sales commission back to a selling broker.
  • Expense Ratio – This is the meat and potatoes of what it costs you to own an investment.  Funds deduct this amount from the mutual fund’s activities to cover everything from employing a fund manager and analysts, to putting out prospectuses.
  • M&E Fee (or Mortality Risk & Administrative Fee) – Some plans are offered through insurance companies, and these plans may include an M&E Fee (which is derived from the industry term Mortality & Expense, I realize it doesn’t match up with the more formal description above).  M&E Fees cover a wide range of costs, such as commissions, selling expenses, administrative charges for running the program, and any insurance guarantees that may be offered.
  • Front-End Load – These have largely disappeared from 401(k) plans, but other retirement plans may still have them.  A Front-End Load is a sales charge that comes off of the top of your deposits into your plan.  This amount typically goes to the selling agent, and can range from 1% to 5.25% on the high end.

One last note – just because you’ve chosen an investment option in your 401(k) that is traditionally low-cost, it doesn’t mean that the one inside of your plan is.  This great piece by Brent Hunsberger of The Oregonian details the huge expense difference between an average S&P 500 Index Fund and the one that was being offered in a reader’s plan.  Take a few minutes to read and understand your disclosure form when it arrives, and make choices that are right for you and your future.

Do you have any questions about the new 401(k) Fee Disclosure Forms?  Are there other investing terms that you have questions about?  Please let me know!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Most Read Posts – July 2012

Word Cloud of words posted in the blog – July 2012 (Wordle.net)

Below are the 10 most viewed posts on the Upperline Financial Planning Blog in July 2012:

  1. 6 Tips For Refinancing Your Home – Financial Rules of Thumb Series
  2. It Takes Time
  3. Student Loan Consolidation Deadline June 30th
  4. On Positive Action in Light of Tragedies
  5. Financial Rules of Thumb Series – How Much Should My Car Payment Be?
  6. 100 Minus your Age? – Financial Rules of Thumb Series
  7. Life Is But A Dream
  8. You May Not Like the Choices you Have, but You Do Have Choices
  9. My 6 Favorite Business iPad Apps
  10. Lending Money to Adult Children? 4 Points to Consider

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Life Is But A Dream

I was sitting at dinner last night with my wife and daughter, who is really into singing “Row, Row, Row Your Boat” lately.  As we sang the song twenty or so times at dinner, I did look at the two of them and realize that all of the good things in my life were just a dream to me, not that many years ago.

My wife, my daughter, the home we live in, my business, and so many other things that we enjoy in our life every day is something that I hoped for, and that we set out to create, together.  While singing the song over and over, I started to think about the lyrics and how they relate to our life.

  • Row, Row, Row Your Boat.  The life we enjoy today was not just because of our dream, but the work that we have put into it, together.  I want to continue to dream of the things we can do together, and work every day to achieve them.
  • Gently down the stream.  My friend Ed Jacboson reminded me recently that we too often think life is ‘yes, but’, instead of ‘yes, and’, as in “Yes, things are good, but they’ll be great when _______ happens.”  Far too many times I strive and stress and worry, and it takes away from the joy that we all share together.  I want more from life, and I want to be aware of the fullness that we have in the present moments that I easily miss.
  • Merrily, Merrily, Merrily, Merrily.  For those of you that know me, you know I can be a fairly serious person, and I’ve been that way since I was a kid (shocking, I know).  The greatest gift I’ve received from my daughter is her love and laughter.  I want to be more merry and for us to create more moments for us to laugh as a family and enjoy each other.
  • Life is But a Dream.  Today was yesterday’s dream, and I want to be more present.  We all have wonderful gifts in our lives, even if we don’t always see them.  My goal for the coming weeks is to see and appreciate those gifts and share them with those closest to me.

Where are you rowing your boat? 

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

You May Not Like The Choices You Have, But You Do Have Choices

"There is only one success in life - to spend your life in your own way." - Christopher Morley

The first time I meet with a new or prospective client, they say at some point in the meeting that they’re not where they thought they would be when they started their financial lives.   They’re concerned about reaching their goals, or maybe they’re just too far behind to ever reach them.

My response is nearly always the same.  “You may not like the choices you have, but you do have choices.”

My goal in working with clients is to help them get the most out of the one pass through this world that they have.  In order to do that, you’ve got to come to terms with your past.  The decisions that you’ve made brought you to this point today, where you can begin to make new choices and take new steps directly towards your goals.

You can choose to spend less, save more, or some combination of these two actions.  The more clarity you have around your financial goals, the easier this becomes.  You can’t say ‘no’ until you have a bigger ‘yes’.

You can choose to deliberately spend more time with the people that matter to you.  Our closest relationships provide us with the greatest return on investment when we consider how little we need to spend in order to have a great time with them.

You can choose to leave a job that you’re staying in because the money is good, and move to a job that is fulfilling in ways that are more lasting than a paycheck.

You can choose to live life on your terms.  You just have to change your definition of what success is.  Make it your definition, not one that your parents or society gave to you.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

On Positive Action in Light of Tragedies

Holding Hands

If you’re like me, you’ve spent most of the morning watching the coverage of the tragedy at the theater in Colorado. It’s sad to know that things like this can happen, and that life is so fragile.

As I watch the coverage, I feel the anxiety build inside of me, the fear of losing somebody close to me or my own life in such a situation. Something that seems to be truly random, and out of our hands.

But that’s it, it’s just random. Beyond living our entire lives in a shell, I don’t know that there’s any way to protect yourself from something so unpredictable.

Coverage of events like this often leave me looking for a distraction, on a sub-concious level. That distraction can be life-consuming, like immersing myself in unproductive things on the internet, going shopping to take my mind off of things, or just feeling helpless and out of control, and losing valuable time to fear.

By now, you may be asking: what does any of the above have to do with financial planning?

I had a great meeting last night with new clients, where we were discussing how important family is to them and some relationships that they’d like to invest more time in. I believe that’s a pretty universal feeling, none of us feel like we’re spending as much time with our loved ones as we would like. So in response to tragedies like this, I suggest the following.

Reach out to someone.  Call the friend, aunt, or cousin that you’ve been meaning to reach out to.  Find out how they are doing, and share the events of your life with them.  Email someone you haven’t seen in a while and schedule coffee, dinner, or drinks.  Find a way to break away from the negative news that surrounds us on a day like today and put some energy into the people that you would miss and who would miss you if you couldn’t see them tomorrow.  Spend your time and money on your family and friends, on creating the connections that make life worth living.

Let your positive actions today be your memorial for those that no longer have the opportunity.

 

 

 

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

It Takes Time

I was speaking with one of my mentors yesterday afternoon, about something that I was frustrated wasn’t happening quickly enough for my preferences.  She reminded me of a simple lesson that I struggle with, but that’s worth repeating.  What she said was:

“It takes time”

I know that’s simple, but it is really powerful if you can pause and think about it.

It takes time to grow into new habits.

It takes time to learn new ways of thinking about your money.

It takes time to grow worthwhile relationships.

It takes time to reach your financial goals.

It takes time to build a business or a career.

It takes time to get out of debt.  

It takes time to become the person you want to be. 

This isn’t to say that we can sit by and do nothing and hope that our goals become reality.  Far from it.  We’ve got to work at it and strive for it. But we have to also understand that there are no shortcuts.  We can both strive for something better, and enjoy where we are on the journey.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Top Posts of June 2012

Below are the 10 most viewed posts on the Upperline Financial Planning Blog in June (word cloud from Wordle.net)

Certified Financial Planner - Top Posts of June 2012

  1. Student Loan Consolidation Deadline 6/30!
  2. 6 Tips for Refinancing Your Home – Financial Rules of Thumb Series
  3. “If You Don’t Get It Built, The Work Doesn’t Matter”
  4. Who Are Your Beneficiaries?  Are You Sure?
  5. Financial Rules of Thumb – A Planner’s Perspective
  6. Teaching Kids Using “Money As You Grow”
  7. Financial Rules of Thumb Series – How Much Should My Car Payment Be?
  8. A Financial Plan for When (If) You Get Laid Off
  9. 100 Minus Your Age? – Financial Rules of Thumb Series
  10. A Difference Between an Employee and an Entrepreneur

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Student Loan Consolidation Deadline 6/30!

If you’ve got Student Loans, you need to be aware of this deadline and the opportunity it presents.

The Department of Education is offering the opportunity to consolidate student loans from a private lender with student loans held directly by the Department of Education.  The opportunity to consolidate these Direct Student Loans as well as any Family Federal Education Loans (also know as FFEL Loans) is going to expire on 6/30 and I think that it’s an amazing opportunity to simplify your financial life, as well as potentially benefit from other federal student loan program benefits such as forgiveness programs that are not available to loans issued by private lenders

A few key benefits:

This program would allow you to have one servicer and one payment for all of your eligible student loans.  That’s a huge benefit.  I’m always recommending to clients that they simplify their financial lives and consolidate accounts when possible, and this is a great opportunity to do just that.

You can save on interest.  Loans consolidated in the program will receive a 0.25% interest rate deduction on any private loans that are consolidated. The interest rate is fixed for the life of the loan, so you’ll lock in your current terms.  (If you sign up for automatic debit from your bank account, you can save another 0.25%.  That’s easy savings.)

Eligible for Public Service Loan Forgiveness Program.  If you work for a public entity or certain 501(c)3 not for profits, you may qualify for the balance of your loans to be forgiven after making 120 contiuous payments.  This is a huge benefit for those of you that work in education but don’t qualify for the teacher student loan forgiveness programs, or for others who work for other not-for-profits.

To consolidate your Student Loans, go to www.studentloans.gov and log into your account.  If you’re eligible, you’ll have a message in the “Alerts” box on the top right of the page.  Here’s a link to the Department of Education’s Frequently Asked Questions about the program.

If you have any questions, please contact me and I’ll do my best to help you out!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

100 Minus Your Age? – Financial Rules of Thumb Series

[This post is part of the Financial Rules of Thumb series.  Check out the rest here!]

Today’s rule of thumb is:

“100 minus your age equals the allocation you should have to equities in your portfolio”

The Upperline:  It’s far more important to know how much risk you’re comfortable with, than to use this as a guideline.

This rule of thumb is dangerous not because it’s generally untrue, as I think that this is often a reasonably appropriate guideline for many investors.  The problem is, if it’s not right for you, it could have huge consequences.  I often hear from investors that they’re taking more risk in their 401k because they’re younger.  Conversely I hear from investors nearing retirement that they’re moving their entire portfolio into bonds and Certificates of Deposit.

That may be exactly what they should be doing, but the problem is that those strategies don’t have value on their own.  Those strategies only make sense within the context of your personal risk tolerance and your family’s financial goals. Continue Reading…

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

“If You Don’t Get It Built, The Work Doesn’t Matter”

The above is a great quote from Seth Godin’s Blog today.  He references the work of architects and how it doesn’t matter how beautiful the plans are if the building never gets constructed.

I think Financial Planning operates in much the same way.   We can craft elegant financial plans for clients that will help them reach their goals.  We can generate pages of material to back up these plans, and present them in a beautiful manner.

But if we can’t help clients build those plans, brick by brick, month by month, it doesn’t matter.  We’ve given them beautiful blueprints for a building that will never exist.

What’s more important?  The plan, or the outcome?

We all need to focus more on the daily and weekly actions that will lead to successful years and ultimately to a life well lived, and with the financial resources that support our goals and dreams.  This reason is why an ongoing relationship with a financial planner that can help to guide and revise plans as life’s inevitable changes come at us is so important.  Writing a plan and putting it on your bookshelf isn’t going to help you reach your goals.  Regular consultations with a caring planner can.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Page 3 of11«12345»10...Last »